Scandi Daily 10.29

OVERVIEW – Despite the rate hike in Norway on Wednesday, the krone was very well offered on the back of some broad based currency liquidation and paring back of risk. The regional currencies were underperformers across the board with the krona getting hit even harder, on a less attractive yield differential and ongoing concerns over exposure to Eastern European markets and weaker than expected domestic data. The krona has been very tied to risk sentiment and any continued reduction in risk appetite should continue to weigh on the Scandi. The Nok should also come under some more pressure as investors’ interest rate expectations within the region become less aggressive. While the Norges Bank has been in a position to be able to raise rates, they also need to be conscience of rising asset prices and the threat of a double dip global recession. This is a point that has resonated with investors over the past few days.

Eur/Sek continues to consolidate off of the 2009 lows from August and we contend that the market is in the process of carving out a medium-term base. Any setbacks are expected to be well supported ahead of 10.05, with a break back above 10.45 to confirm basing prospects and accelerate gains.

Eur/Nok fresh yearly low last Thursday by 8.24 but we feel that the market is finally now exhausted and on the verge of some major upside over the medium-term. The latest break back above 8.40 now confirms and should accelerate gains towards 8.50-60. Only back below 8.30 would delay.

Usd/Sek traded down to a fresh yearly low by 6.75 on Monday ahead of the latest sharp reversal. Despite the underlying downtrend, our view is nevertheless constructive at current levels and favors USD appreciation over the coming weeks. We contend the market is attempting to carve out a major base rather than in the process of some bearish consolidation. A break back above 7.10 should confirm bias and get things moving.

Usd/Nok has now officially carved out a meaningful low by 5.50 with the market racing higher on Wednesday to trigger a double bottom formation. The break back above the neckline at 5.66 now opens a measure move upside extension towards 5.80 over the coming sessions. More gains are seen on a break above 5.87. Setbacks should now be well propped ahead of 5.60.

Gbp/Nok finally showing signs of recovery after basing out by 8.82 in the previous week. Daily studies show plenty of room for additional corrective upside, and we look for a push back towards 9.50 over the near-term. Setbacks should now be well supported ahead of 9.20.

Nok/Jpy as had be warned, the market was well overextended above 16.50 and the price has since collapsed into the well defined range. Deeper setbacks are now seen towards 15.50 over the coming sessions.

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